The best cities in Spain to buy a property to let

The profitability of housing in Spain has fallen to 6.4% in the third quarter, compared to 7% a year ago, due to the fall in rental prices. Even so, there are some cities with yields above 8%.
The Spanish real estate market is very active and in recent months records have been broken for transactions, with more than 50,000 sales in July. Sales and purchases also respond to a growing appetite for investment, as there are few profitable investment alternatives in an environment of negative interest rates.

Therefore, although profitability has fallen slightly, it should be noted that it is still 1.2 point higher than 5 years ago (5.2% in 2016) and 2.2 points higher than 10 years ago (4.3% in 2011), according to the study of "The profitability of housing in Spain in 2021", based on the analysis of housing prices for sale and rent in September 2021 by Fotocasa.
Playa de Gandía
Playa de Gandía
"Investment in real estate has become a refuge in the face of the uncertainty caused by the health crisis; many individuals have taken the plunge to invest as they perceive this market as safe after the positive evolution and recovery following the pandemic," explains María Matos, Director of Studies and spokesperson for Fotocasa.

Which municipalities are the most profitable?

The report states that 21% of the municipalities studied have a profitability equal to or above the average for Spain (6.4%). The most attractive city for investing in housing and subsequently renting it out is the Valencian city of Gandía (8.9%), where yields have doubled in ten years (in 2011 it stood at 4.5%).

It is followed by Lleida with 7.7%, Agüimes (Gran Canaria) with 7.6%, Algeciras (Cádiz) with 7.3%, Manresa (Barcelona) with 7.2%, Cartagena (Murcia) with 7.2%, Jerez de la Frontera (Cádiz) with 7.2%, Santa Lucía de Tirajana (Gran Canaria) with 7.1%, Reus (Tarragona) with 7.1%.

With yields below 7% but still above the Spanish average are: Almería capital with 6.9%, La Línea de la Concepción (Cádiz) with 6.8%, Murcia capital with 6.8%, Santa Cruz de Tenerife capital with 6.8%, Roquetas de Mar (Almería) with 6.8%, Lucena (Córdoba) with 6.7%, Telde (Gran Canaria) with 6.7%, Badalona (Barcelona) with 6.6%, Dos Hermanas (Seville) with 6.6%, Alcalá de Henares (Community of Madrid) with 6.4%, Tarragona capital with 6.4% and Ponferrada (León) with 6.4%.

Which ones are the least attractive for investment?

On the other hand, the 10 least profitable cities in Spain are: San Sebastián (Guipúzcoa) with 3.7%, Sant Cugat del Vallès (Barcelona) with 3.8%, Santiago de Compostela (A Coruña) with 4.0%, Pozuelo de Alarcón (Community of Madrid) with 4.1%, Getxo (Vizcaya) with 4.1%, Estepona (Málaga) with 4.2%, Barcelona capital with 4.3%, Fuengirola (Málaga) with 4.3%, Sitges (Barcelona) with 4.4% and A Coruña capital with 4.4%.

Investors should bear in mind that profitability fell in the third quarter for the first time since 2010 (according to Fotocasa's historical data) due to the fall in rental prices since the beginning of 2021. This trend could be accentuated in those territories where the new housing law has been already applied, which limits rental prices in stressed areas. For the moment, it is not having an impact because the government has not yet calculated the reference prices and, furthermore, the autonomous communities governed by the PP have assured that they will not apply it.

The profitability of housing by cities

Based on Q3 data of 2011, 2016, 2020 and 2021, in percentage.
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